White goods and 0% finance

About a year ago I went to buy an LCD TV and was made the following offer.

"You do not need to pay all the money for the TV upfront. The price that you negotiate for the TV will be divided into 10 installments. 2 installments need to be paid as a down payment and the remaining 8 installments can be paid over the next 8 months and if all the installments are paid promptly then you will be returned the last installment"

This offer seemed absolutely wonderful for the following reasons

• I do not need to come up with all the money immediately
• I get money back at the end of it
• I can actually do stuff with the money that I was planning to pay for the TV with like earn some additional interest on it

So with a little skepticism I took up the offer with Citi Financial and after some verification and some proofs that they demanded I got an LCD TV with just 1/5th of the cost of it out of my bank account. They promptly deducted the money over the next few months and I was presently surprised when I got a cheque with the last installment refunding it back to me with no follow up from my side.

I am not sure where the financial companies gain out of this whole deal as I have not paid them a dime. My thinking is that the white goods manufacturers are paying the finance company something as they are able to push high value items at an affordable rate. White goods manufacturers have an advantage doing this as they get rid of their stock and are also convincing border line buyers as they reduce the burden of a one time payment.

I just did the same thing for the air conditioner that I just bought and the strategy that I followed was as follows. Go into different shops as if you are going to pay by cash and negotiate the best deal possible. Once all the negotiations are over ask the sales person if there is a finance option available and he will introduce you to the credit finance guys. When I bought the LCD TV I was introduced to Citi Financial and for the AC I was introduced to ICICI. The other thing to look out for is that different financial companies have different schemes so you may want to ask them what are the options available. During the purchase of my LCD TV there were 2 options available for me.

Another benefit that I see is that when and if we do get into serious credit rating in India going for such schemes will improve your credit rating with no expense from your side. This basically shows that if someone gives you money they can have some amount of comfort feeling that they will get their money back as you have a history of taking credit and repaying it on time.

One note of caution is that these finance schemes will tempt you to spend beyond your means. The thumb rule that I follow just as in a credit card expense is that if you cannot afford paying for it upfront do not buy it. The credit card or any such finance options should be used only to spread out the money flow but not to make you go overboard.